Would the exit of Greece be good for the euro? Nobody will ever know the answer unless it happens.

When are people going to accept that trying to bring so many different countries of differing cultures and economies under one umbrella was always going to end in disaster? The results of the political and economic realities of this European experiment are there for one and all to see. The pessimism sweeping Europe over the debacle that has been unfolding speaks for itself.

If Greece exits the EU and adopts the drachma, one thing is certain... the sun will still rise every morning. The other EU partners are predicting doom and gloom for one reason only... to frighten Greece into remaining in the EU for the sake of ensuring the EU does not disintegrate.

The Greek people must understand one thing. Greece survived before the EU. It can survive without the EU. It can reintroduce the drachma, have the ability to devalue the currency and oversee a turnaround in its economy in a way that can never happen if Greece remains under the direction of its European economic masters.

The last thing Greece needs right now is economic advice on the future outside the euro. Sadly, the economists have been so wrong about the euro and the EU in general. As Margaret Thatcher once stated in a radio interview in 1979, put 10 economists in a room and you will get 100 solutions. That's not to put down economists, but sometimes, even economists have to recognise that what they deal with is only theory... just theory, and were they required to be held legally accountable for their advice, they would probably not so freely part with their economic advice.

Unfortunately, dear friend, although many Greek people are already thinking about the exit in an increasingly positive way, the majority of the population are overwhelmed by the intense propaganda and fear that are used to pressure them. When the whole establishment of politics and media aims to maintain the status quo to their benefit, and perform daily brainwashing, even the most stubborn people can sway. I feel sorry for Greeks, because this situation drives them crazy.

I think the last sentence your article is a perfect summation of the problem. This is a failure of politics more than economics.

Ultimately there does not need to be a financial catastrophe. Whether you think the Euro is a good or a bad thing, no one can argue that it is working as it should.

If the Euro should be broken up, then it should be done in a structured manner. Stabilize the patient first, then amputate. This does not seem to be what Germany is doing. It is being treated like a political game of chicken, and damn the consequences if neither side blinks.

"This could be done through “banking union” in which responsibility for supervising, winding down and recapitalising big banks is done by some supranational European system. Another option is “fiscal union”, in which at least some of the sovereign debt is mutualised through jointly issued Eurobonds. Doing both would even more convincingly break the deathly embrace of zombie banks and zombie sovereigns."

As far I remember the UK and the US have a fiscal union and mutualised dept, however, the profits are of course not mutualised and so we end up with zombie sovereigns in any case.

TE seems to preach profit liberalism only for the chosen friends from the city and zombie-dept socialism for the rest.

The only thing that can "convincingly break the deathly embrace of zombie banks and zombie sovereigns" are rapid structural reforms supervised by constitutional courts and independent agencies instead of (European) politicians and their bankster friends.

Greece out of the EZ will actually have a better chance of finding back to its original economic base as a cheap holiday destination, offering competitive shipping rates and low unit cost as sub- supplier to the northern countries. Remaining in the EZ it would act as a continuing irritant and polluter, spreading moral hazard and discontent.

Greece should and will receive liberal help from the rest of Europe. If the ECB suffers as a result of a Greek exit, this has, in fact, already been factored in when it became evident, that the Greek blackmail would otherwise go on forever. It should sharpen perception before letting in other doubtful candidates without a proper look at their books. Stupidity and incompetence does have its price, after all. Once burnt, twice shy.

Greece returning to be a cheap holiday destination may suit German prejudices - but it does not resolve the problem of all the debt the country has acquired.

Greece will NOT recieve liberal help - either from Germany or from the rest of Europe. Nothing is gifted now, in their darkest hour, and nothing will be gifted later. This is like saying, let's send the Jews to another country - once they accept to move there, we are sure there will be people willing to help them.

Oops. That is what Germany did in the end with their Jews. Ah yes, now I understand what the Germans have in mind for Greeks...

Is this Chamberlain talking? Is this 1938 all over again when England gave up on Europa and gave Germany everything? And aggain the future of Europe is in the hands of Germany. Again England and France are doing nothing. Even saying that it is a good thing if we drop Greece. WHAT ARE FRIENDS FOR???
WHERE IS CHURCHILL (everybody laughed at him when he warned in 1938)???

Once again. Kicking Greece out is IMPOSSIBLE and the MOST STUPID thing to do. IF YOU HAVE A PROBLEM YOU FIX IT, YOU DONT KILL THE WEAKEST MEMBER and hope the problem will then go away.

There are three problems:
1. Politicians are unable to reduce public spending so that nations live within their means and start to reduce their debts.
2. The voters in EU countries won't vote for politicians who propose cutting spending to achieve (1).
3. Individual nations are not prepared to hand over their powers over taxation and spending to an EU body.
It is a mistake to suggest that EU countries are insolvent. They have assets they can tax or sell. They lack the political will or popular support to raise money this way. A simple one off 50% tax on assets in Italy would restore the nation's finances - but it ain't going to happen.
If the politicians won't solve the crisis and the people won't support the solutions to the crisis, then the crisis will continue until it is physically impossible to defer the collapse any further.
At that point, the Euro will end. The EU will end. It will end because there isn't the political will for it to continue.

If Greece doesn't keep to these rules, and let's say just skips out on all its debts, what can Germany actually do. If they don't want to leave the Euro, they don't have to, and I don't think they want to.

First, a major reason why Germany wants Greece to stay in the Euro is that their (and French) banks are heavily loaded with Greek debt - and would lose big time on a Grexit.

Second, there is a rule: every complex problem has an easy solution. Which will be wrong: because complex problems have complex solutions, and the Greek/Euro problem is complex. A banking union (easy solution) would require treaty changes: and, in current circumstances, any EU national leader would be unwilling to put a EU treaty change before their parliament (never mind their public).

Angela Merkel has, apparently (le Monde), set out her (complex) solutions to the Euro-crisis, in an 8-page document. Can Charlemagne please tell us more (with comment, of course)?

A Greek exit is good for nobody but it is time to get tough. There has been too much blackmail from Greek politicians. First Papandreou, who made a deal first, and tried to wriggle out of it via referendum later. Then Samaras who openly undermined the Papademos government boasting he would get "a better deal". Now Tsipras, declaring all Greek obligations towards the EU and the IMF null and void. The only way out of a mess is a plan everybody involved agrees on that is widely communicated to reestablish trust. Can't be done if one side at the table is unreliable. It is even in doubt whether the Greek elections will produce a government politically stable enough to make reliable commitments towards international partners. The Reuters piece highlights another source of unreliability: apparently there is a lot of friction between Greek politicians and Greek civil service.

Greece did not "agree" to various bailout deals. Conditions were imposed upon Greece which might have been achievable had deeply recessionary years been avoided, but which proved impossible to achieve as their economy has dropped 25% in four years.
Insisting the Greeks are "reneging" on their agreements is purely sadistic on the part of the Germans in this context. Schroeder himself said in an interview with the Italian Corriere della Sera two weeks ago that Germans voted against him because of his austerity plan in 2003 - and that in any case the austerity would have been impossible in a recession (he also complained that Merkel was taking the credit for his reforms).

Why are political leaders 100 steps behind the man on the street? (especially the Greek street). Of course Greece leaving the euro is a good thing, because there is no other way out of the situation. Europe is not going to change fast enough (financial unification) for Greece not to default. Also it's not do we get financial unification, or do countries leave the Euro, it's both. Countries that have no prospect of paying back debts need to default (and then are forced out the Euro). Meanwhile the other countries rapidly go for strict financial integration. In 5 years time, these defaulting countries can apply to join the euro again, but this time they have to abide by much stricter rules, and more importantly, there is an exit policy if the countries don't abide by the rules. Our political elite just make me want to put my head in my hands and sob with desperation. They are terribly incompetent.

if it's good for the Greeks to leave EZ, why wouldn't it for us too?
The euro was a alien currency since the beginning, it is the cause of many pains and evils, but a revelator of the EU elites objective, being a priviledged class, that will do all its possible to keep its stu-quo, and of Germany's agenda : shaping Europe for Germany's needs !

As I predicted, La Belle France, which brought this currency into being in order to control ze Germanz will be the first to try to end it, having not succeeded in their task. On the contrary, what did not kill ze Germanz made them stronger. Oh dear, oh dear!
Well, we will simply have to fight it out at soccer. Let's hope both France and les Rosbifs advance in their group to give us a chance to show them how football should be played.

that's the most shared lie by the Germanz, Kohl was but for the euro, it was a nightmare to manage Eastern Germany modernisation without the EU funds, that were floading there like in the new EU member Spain (still today the EU funds toward Germany are the double of what France gets), for that Kohl needed to press for more EU, hence the euro event, which was already programmed, since the seventies for Brussels, since a couple of years for Germany, Delors was working with the Bundesbank frame before that the Berlin wall was teared down, and, even, if really the Germanz hadn't wanted the euro, they could still have vetoed it at the Bundestag, and in Karlsruhe, like they know how to do when they don't want to endorse a EU proposition that isn't a german initiation, they didn't oppose the euro, why?

yes, I know, it's never Germanz' fault

Now that the German reunification is a decades anniversary, and that Eastern Germany if fully modernised, when will Germany quit the EZ? cuz she doesn't need to show what a good girl she has become since 1945 ?

I still believe Monsieur Hollande is actually “our fifth column” in France. Once he is home and dry after tomorrow’s vote he will don a hair shirt and do his Canossa walk to Berlin, lie prostrate underneath Angela's window in the Kanzleramt and lament: "Angela, let me in. I will be more handzahm than Sarko. I promise. You are my destiny ... and other sweet nothings"
Boff!

Monsieur Hollande, indeed, appears to be more „feminine” in character than the macho Sarkozy. Socialists on the whole are more “feminine” in their psychological make up in as far as they usually subscribe to a dependency culture, a client state, whilst Conservatives like Frau Merkel adhere to the more masculine virtues like self-reliance and standing on one’s own feet.

This is what the whole Eurobond debate is all about where “sugar daddy” Germany is supposed to issue sub credit cards to his various southern brides simply based on the way they flutter their eye lashes at him.

Fortunately Frau Merkel, a woman, will not fall for this and will expect them to cut their long painted fingernails and work their fingers to the bone before she opens her purse.

Mind Hollande, he is the one that nuked the socialists and won the presidential elections in spite of them having preferred a Martine Aubry (who is Delors's daughter) that had a larger prepared ground. He is clever at manoeuvering behind the curtains, and courageous within the political combat.
Yes he has kinda a "feminine" mind, hey, you know, when a woman wants something...she'll get it
Merkel is playing her voters' part, she can't tell the Germans that she will accept Hollande propositions, like she refused any other propositions before, but finally ended at buying them in last resort.
If the euro is still in Merkel's books, she 'll make compromises, if the euro is condamned, there's no way that Germany will add more into the basket, and there's no way that Hollande will change his position too.
so, wait and see after the greek elections

Perhaps the Economist could shed light on the past successes of monetary unions without fiscal union.
I suspect that would be interesting reading given that I'm not familiar with any that were successful.
Does it work? No. And it can't by definition.
I would suggest a paragraph also about pegged currencies. They work well too. Until the country with the pegged currency runs into deviation from the country it has pegged it's currency to. And then it runs into similar problems which it solves by uncoupling.
Monetary unions are a mirage. If the United States was a monetary union only and each state was sovereign it might be Mississippi going to the polls on Sunday and Texas only willing to lend it more money if it comes up to speed. Without the federal government and it's responsibilities and powers, it wouldn't have taken a civil war to test it's fiscal union - because it would have disintegrated long before then without one.
Only a fiscal union can make a monetary union work in the long run unless some other coersive force is at work and the Soviet Union is an example of that.

It worked for over three centuries across most of the world (the gold standard).

There were two principle problems:
- changes in the demand for and scarcity of gold generated both inflationary monetary expansions and deep depressions (this is a consequence of gold-indexing rather than monetary union)
- in general, monetary policy was unavailable to deal with asymmetric shocks. Countries just endured the occasional recession without bureaucratic action to fix things. Since were open, recessions were the biggest drivers of migration - within Europe, from Europe to the colonies, and within the US also. Labour markets were flexible, and recessions resulted primarily in wage reduction rather than unemployment.

Similar things can be said about the Roman Empire's (much longer) silver standard (which did occasionally have an active monetary policy).

There is nothing intrinsically flawed in a monetary union. Even in Greece, the government is more likely to unilaterally freeze all debt payments, nationalise the banks and cut salaries/ benefits, than to start printing and paying with a replacement currency (purely because of domestic politics - even the neo-Nazi Golden Dawn want to keep the euro).

Note that while such behaviour by Greece would mean formal ejection (somehow) from the eurozone and probably the EU, Greece could nonetheless continue using the euro - much as Montenegro does.

Given the oversized tourism industry - and given the massive black economy - continued widespread use of the euro is inevitable. The people do not support any politician who would attempt to remove the euro as legal tender (and the people would defy any government that attempted this - probably resulting in non-uptake & hyperinflation of any new currency that anyone tried to introduce).

Perhaps a new currency would serve one useful purpose however: it would implement a massive reduction to government pension promises (which need to go) and military spending (which is currently at obscene levels).

The problem of the euro is mostly just a banking crisis - compounded by relatively large sovereign debts (whose liquidity isn't supported by the ECB, unlike with the Fed or the Japanese central banks).

Then there is Greece - which already pays over 9% of GDP in government pensions - a figure which would more than treble in the next 20 years, if the government met its formal commitments. Which is absurd and stupid, and guarantees both sovereign bankruptcy and that pensioners won't get their money. Greece needs to lift its retirement ages, increase retirement savings and cut retirement income. And then get on with improving its institutions.